Overview of Distribution and Logistics
Distribution and logistics management constitutes a major undertaking for any contemporary business organization. Very few aspects of business operations affect the organization the same way that logistics and distribution does. For instance, service level performance impacts on, among others, consumer satisfaction. On their part, the revenues generated by the firm are influenced by delivery expenses. It is also noted that income statements are affected by carrier costs and labor. In addition, funding of warehouse and rolling of stock impact on the firm’s balance sheet.
Consequently, logistics and distribution influences the organizational performance of any enterprise. Chopra and Meindl (22) provide a working definition of the logistics concept. Chopra and Meindl refer to it as “the process of planning, executing, and controlling efficient and effective storage and flow of goods and services” p. 22). In addition, the process enhances the flow of related information from the point of origin to the consumption node. The aim of such a flow is to meet the requirements of customers and address prevailing trends in the market.
With regards to Ocean Beauty Center, logistics and distribution is important as it determines the location and quality of services offered by the company. The management of this process (logistics and distribution) is aimed at ensuring that the organization provides high quality services. It is also expected that effective management will lead to the reduction of operational costs. In addition, logistics and distribution functions will facilitate flexibility in relation to the constant changes recorded in the market within which the organization is operating from.
As already indicated in this paper, it is apparent that logistics and distribution affect many activities and procedures in organizations. The management at Ocean Beauty Center is aware of this fact. Ineffective and poor regulation of this process may lead to increased operational costs. It may also result in a decrease in the quality of services offered to customers.
According to Christopher (44), the activities involved in logistics and distribution can be classified into two broad categories. The two include core and supporting activities. The former cluster of activities is evident in every aspect of the supply channel. Core activities include customer service, transportation, inventory management, and flow of information. Logistics supporting activities vary from one company to the other. They include handling of materials, warehousing, and purchasing. Consequently, logistics and distribution in Ocean Beauty Center is regarded as a continuation of the marketing process. The activities cannot be isolated from the core undertakings of the organization. They affect the whole process of marketing adopted in the firm. To this end, logistics will determine customer satisfaction, firm profits, and coordination of efforts.
The figure below illustrates how flow of material is influenced by logistics:
Channel Members for Ocean Beauty Center Services
Logistics and distribution focuses on the network that brings together all participants and stakeholders involved in the supply chain. Such parties are engaged in the receipt and storage of products. They are also involved in communication and transportation as far as the activities of the organization are concerned. It is important to note that Ocean Beauty Center is involved in the provision of beauty care and salon related services. Various products are required in the provision of these services. For instance, the organization has to source for an assortment of cosmetic products from suppliers. Some of these inputs include lotions, skin-care creams, perfumes, lipsticks, acrylic fingernails, nail polish, towelettes, hair colors, and colored contact lenses. Other tangible products include gels, hand sanitizers, deodorants, bath oils, buffers, bath soaps, and hair sprays.
All these products, together with the related services, require effective logistics and distribution management. The effective handling of these activities will help Ocean Beauty Center to provide services to individuals and corporations at locations of their convenience and at an added cost. For instance, an organization like a television station may order for makeup services for their presenters.
It is apparent that Ocean Beauty Center needs to bring on board a variety of logistics and distribution channels. The channels will handle both inbound and outbound logistics. For example, they are used to manage the movement of inputs from the suppliers. Logistics is also used to regulate the transition of goods and services from the firm to the customers.
According to Waters (76), the movement of materials from the suppliers to the organization is referred to as inward or inbound logistics. On its part, the flow of products to the consumers is regarded as outward or outbound logistics. The process of sourcing for various materials by Ocean Beauty Center is inbound logistics. On the other hand, providing services to the clients falls under outbound logistics.
Multiple-Level Channel Members
Considering the nature of Ocean Beauty Center operations (inputs and outputs), the organization will utilize a number of logistics channels. For example, inbound logistics will be managed using multiple-level channels. Zero-level channel will be used for outbound logistics. Multiple-level conduits refer to a situation where an organization works with two or more tiers of distribution partners (Waters 81). To this end, Ocean Beauty Center will work with various distributors for inbound logistics.
The selection of multiple level distribution channels for Ocean Beauty Center is based on a number of factors. One of the reasons is the fact that most of the products used by the organization originate from different producers. For instance, artificial hair, nail polish, and skincare products are supplied by different business partners. By using the multiple-level channel, the organization will simplify the logistics process. For instance, Ocean Beauty may order for 6 products from different manufacturers. To achieve this fete, logistics managers will need to establish 6 varying receiving routes. Such complexity is reduced by sourcing from few intermediaries, such as wholesalers.
Considering that Ocean Beauty focuses on the provision of beauty care services, outbound logistics will be managed on a zero-level basis. Zero-level channel involves a situation where the seller links directly with the buyer (Waters 82). Ocean Beauty Center will provide services directly to the buyers. Corporations or other institutions seeking these services will be regarded as direct consumers.
In some instances, clients may come back to the organization with complaints. For example, customers may complain of allergies because of some products used on them, such as hair colors. In such cases, reverse channels will be utilized to build relationships with the communities and the consumers. Here, the clients will be offered ‘repeat services’ for free. In addition, the organization will raise such issues with the supplier of the product in question.
Channel Intermediary Members
Inbound logistics: Products and materials
Ocean Beauty Center will only use one type of channel member in relation to inbound logistics. To this end, the organization will opt for the wholesaler. Most of the products used by the organization to provide beauty care services are manufactured outside the UAE. For instance, Moroccan bath services are provided using products imported from Morocco. In addition, the company uses Kaysha Hair Shampoo, which is manufactured in India.
It also uses Herrco Aromatherapy bath oils and gels from the UK. Given the diverse nature of the inputs used, sourcing directly from the different manufacturers will be an enormous and expensive task for Ocean Beauty Center. Consequently, local distributors and wholesalers will be the preferred channel intermediary for the organization as far as the acquisition of these products is involved.
The figure below illustrates the complexity involved in dealing with manufacturers for inbound logistics:
From the figure above, it is apparent that Ocean Beauty Center falls under the second tier of customers in relation to inbound logistics. However, as already indicated in this report, the organization does not engage intermediaries when dealing with the customers (outbound logistics). The role of the wholesaler will include sourcing for the products and materials used by the company. In some instances, the organization will have to place orders with the wholesalers for customized supply of materials and products.
Computerized Inventory Control System will be utilized by Ocean Beauty Center to manage the movement of materials and products into the organization. The system will address various inbound activities related to logistics. The activities include purchasing, tracking, storing, and reordering of stock (Waters 83). More specifically, Ocean Beauty Center will rely on vendor-managed inventory systems and agreements for inbound products. In this approach, the wholesalers will be convinced to manage inventories for the organization. The system will provide automatic daily reports to the wholesaler, who will replenish the stock when the need arises. The model allows the supplier to track the inventory held by the client on a daily basis. Restocking is carried out automatically as per the agreement.
Flow of data and finance in the supply chain
In addition to receiving materials from wholesalers, Ocean Beauty Center will also manage inbound logistics in relation to incoming data and finance. The organization’s marketing programs will require external information. The data involved here will include market trends and conditions. In addition, the organization will use intermediaries in relation to financial transactions. For instance, customers will be offered a range of payment options, ranging from electronic money transfer to cash transactions. The information will be processed as part of inbound logistics.
Data and finance also need to be managed from the perspective of outbound logistics. For instance, placing orders with the wholesalers will involve outward logistics and sending out information. Paying the suppliers (wholesalers) will also entail outbound logistics. Chopra and Meindl (43) stress the importance of information flow in logistics management. It is noted that information provides a link between the various stages of supply chain. It also facilitates the coordination of the various activities involved in these phases, bringing about total maximization of the supply chain. The process falls under information flow in the organization’s logistics management chart.
Financial flows in Ocean Beauty Center will be updated and improved depending on the changes taking place in the management of supply chains. Some of the challenges expected with regards to the movement of financial resources include unpredictable and unreliable cash flows, slow processing, and costly processes. As a result, the company will utilize emerging innovative payment solutions, such as credit cards. Ocean Beauty Center will also pay the wholesalers through electronic money transfer systems. The data and information used to track inventories may also pose major challenges in logistics management. However, the vendor-managed inventory system adopted by the company will solve this problem.
Outbound logistics
According to Waters (84), the movement of products and materials from the company to the consumers keeps the business alive. As previously mentioned in this paper, Ocean Beauty Center will use no intermediaries in the provision of beauty care services to customers. The flow of finances and data will entail both outward and inward logistics. The movement of the two elements will take place as highlighted in the sections above.
Distribution and Intensity
The initial location of Ocean Beauty Center is Al-Ain. The location is near the Al Jimi Mall “Carrefour” and the Al Jawhara branch of Dubai Islamic Bank. However, the organization intends to expand its salons and beauty shops into other parts of the United Arab Emirates. Direct channels of distribution will play a critical role in this expansion. The reason for this is the nature of the services offered by the company. The spread of the salons and beauty shops, as well as the level of intensity involved in establishing them, will determine the degree of success the business will enjoy in the region. The intensity of distribution activities is determined by the nature of the channel selected.
Ocean Beauty Center will rely on zero-level channel for outbound logistics. The organization will establish a direct link with the consumers. The business will not use any intermediaries or engage outlets operating under its brand name. According to Fabbe-Costes and Jahre (133), a business organization can select a strategic channel from a number of alternatives. The alternatives are determined by the nature of distribution and the level of intensity sought by the firm. The choices include intensive, selective, and exclusive distribution. The desired intensity depends on the degree of market exposure that the business envisages. The selected channel should satisfy customer demand and provide services in the right locations and at the correct price and quantities (Fabbe-Costes and Jahre 133).
Intensive distribution illustrates a scenario where the products are placed in numerous outlets (Fabbe-Costes and Jahre 134). The selection of this form of distribution is carried out by analyzing the purchasing patterns among consumers. Examples of products commonly subjected to this form of supply include toothpaste and other household items. The approach provides the product with wide exposure to customers, subsequently providing them with opportunities to buy. The major objective of intensive distribution is the achievement of maximum coverage (Fabbe-Costes and Jahre 135). The image of the outlet is not important in this case.
Selective distribution takes place when the number of outlets for the product is limited. Such limitations may be defined by specified geographic locations (Waters 102). As opposed to widespread exposure, selective distribution aims at showcasing the product in selected outlets (Waters 103). Several parameters are used in selecting the outlets. The parameters include profitability and growth potential of the distributor. A classic example of selective distribution is the placement of designer clothes in high-end outlets.
Exclusive distribution is seen when the product is circulated within a specific area (Fabbe-Costes and Jahre 136). The approach results in the establishment of strong bonds between sellers (suppliers) and re-sellers. Subsequently, the bonds lead to loyalty between the parties. An agreement between the stakeholders discourages the dealer from handling competing products. As a result, the distributor engages in aggressive marketing techniques to move the product.
Ocean Beauty Center will utilize the selective distribution model to deliver its services to the consumers. The distribution channel is preferred since the organization will open several outlets in various parts of the UAE. However, the business will first establish its presence in the city of Al-Ain, where about six outlets will be commissioned. After this, the firm will expand to other towns and cities in the region.
The services offered by Ocean Beauty Center are targeted at the middle and upper classes of the UAE community. Since these groups of individuals are found in towns and cities, the business will concentrate its operations in these regions. As a result, the organization will be able to avail services in locations that are convenient to the target customers. However, prices will vary depending on the location of the store. The choice of distribution channel system involves numerous key decisions on the part of the organization. The selected model will have long term consequences on the various elements of the marketing mix. The management put these factors into consideration when choosing the model.
The table below highlights the various features and aspects of distribution systems and their intensity. In addition, the table highlights some of the questions addressed as far as planning and selection of the most effective distribution system is concerned.
Table 1: Intensive, selective, and exclusive distribution.
Logistical Functions
In most cases, the activities managed in an organization, and which constitute business logistics, vary from one entity to the other. Factors influencing this variation include organizational structure, constituents of supply chain, and individual activities that are important to operations (Closs and Savitskie 65). A number of activities are used to support the management of logistics. Key activities include storage, inventory, transportation, and order processing (Waters 121). Supporting tasks include warehousing, material handling, purchasing, protective packaging, information maintenance, and cooperation with operations and production (Closs and Savitskie 65).
Key and support logistics functions are carried out separately. The reason is that certain activities take place depending on the circumstances prevailing in a given business, while others are present in all logistics channels (Closs and Savitskie 69). Key activities, for instance, are evident in the critical sections of the business. They are the major contributors to the total cost of logistics. In addition, they determine the flow of the various processes involved in logistics management.
A critical analysis of Ocean Beauty Center reveals that the organization specializes in the provision of clearly defined services. However, the company will need to undertake the key functions of the logistics management process. Some of the activities that need to be catered from include storage, transportation, order processing and fulfillment, and inventory management.
Logistical Function of Inventory Management
Jayaram, Keah-Choon and Nachiappan (p. 6840) conceptualize inventory organization from the perspective of the stock held by a given business firm. According to the two scholars, the concept entails ensuring that the business is stocked with the essential products. The aim is to help the organization meet the demands of customers at all times (Jayaram et al. 6839). Inventories are essential to the management of logistics. The reason is that it is not practical or possible to deliver timely services or assure instant production of needed goods and services.
Ocean Beauty Center will use a number of products and services in its business operations. The products used as inputs when providing services constitute inventories for the business. Managing the stock of these products will ensure customers are provided with services without delays. In light of technological advancements in the supply management field, the company will use computerized inventory management systems for this logistical function. The automated system will be supported by agreements with the wholesalers (suppliers).
The inventory management software has the capacity to send daily reports to the wholesalers in relation to the inventory held by Ocean Beauty Center. Restocking is carried out when the critical level of inventories is reached. The management system will facilitate timely delivery of services to customers. A similar system will be used in the other branches that will be established by Ocean Beauty Center.
Logistical Function of Transportation
Transport is important to the operations of any business regardless of whether it is offering services or tangible goods. It offers place value to the organization (Jayaram et al. 6842). The function involves the movement of inputs and outputs for firms dealing with tangible goods. In the case of organizations that deal with services, transportation is a relatively diverse concept with regards to the inbound and outbound logistics.
Transportation logistics entails, among others, service selection, carrier routing, vehicle scheduling, and claims processing. Ocean Beauty Center’s inbound transportation logistics will be handled by the wholesalers. As such, the business will only manage the outbound element of the logistics. The inventory management software will play a critical role in achieving this objective. It will be used to identify the various attributes of stocking points. In addition, the system will be used to generate the appropriate product mix when stocking junctures are realized. Combination of products is realized given that the system sends inventory reports to the supplier on each product used by the business.
Ocean Beauty Center’s sales and marketing departments will be tasked with the responsibility of forecasting sales for short and long term operations. The information will be entered into the inventory management system periodically. The adjustments will trigger the system to request for stocks by including the anticipated sales.
Outbound transportation logistics will only involve the movement of personnel to provide customized services in out-of-house location. Such clients as media houses and other corporations may ask for services to be provided in their locations. In such cases, vans will be used to transport personnel, products, and equipment. However, clients will be charged extra for the out-bound services.
Logistical Function of Order Processing and Fulfillment
Order processing and fulfillment is a key component of logistics. However, the costs associated with this function are minor compared to those related to inventory maintenance and transportation. Order processing is used to determine the duration taken for a customer to receive goods or to be served (Chopra and Meindl 112). The logistical function will be used by Ocean Beauty Center to trigger service delivery. To this end, the business will offer alternative modes for the various functions involved in this process. For instance, customers that are directly seeking services at the business premises will be served immediately. However, the provision of services will depend on the other clients waiting in the queue.
Alternatives for direct services will be provided using an online platform on which customers can place orders. In such cases, clients will be booked for appointments. In addition, the appointments for fulfillment of the services will be queued on a first-booked first-served basis.
Logistical Function of Storage
Activities involved in storage logistics are a major undertaking in businesses supplying customers with tangible products. Storage of products entails determination of space and holding structures. It also involves stock placement, layout, and dock design (Jayaram et al. 6840). Ocean Beauty Center storage concerns will be in relation to the products required for the effective delivery of services. The business will establish holding stores in each outlet. The stored products will be accessed to provide services to the clients. In addition, the outlets will be designed in a manner that displays the products to the consumers. For instance, a wide variety of artificial hairs, soaps, and shampoos will be put on display. Customers will be allowed to choose from these items.
Conclusion
Logistics and distribution management is a crucial undertaking in any enterprise. The function influences the outcomes of all the other operations associated with the business. For example, the expenses associated with logistics influence the prices of goods sold or services offered. In most cases, value is added to the process through minimization of these costs. As a result, more benefits are passed to the shareholders and customers. Ocean Beauty Center will strive to effectively manage the logistics and distributions systems and channels involved in the provision of services. Such a move will help in the realization of the goals envisaged by the firm.
Works Cited
Chopra, Sunil, and Peter Meindl. Supply Chain Management: Strategy, Planning, and Operation, Upper Saddle River, N.J.: Prentice-Hall, 2006. Print.
Christopher, Martin. Logistics and Supply Chain Management. 4th ed. 2011. Harlow, Essex: FT Press. Print.
Closs, David, and Katrina Savitskie. “External and Internal Logistics Information Technology Integration.” The International Journal of Logistics Management, 14.1 (2002): 63-76. Print.
Fabbe-Costes, Nathalie, and Marianne Jahre. “Supply Chain Integration and Performance: A Review of the Evidence.” International Journal of Logistics Management, 19.2 (2008):130-154. Print.
Jayaram, Jayanth, Tan Keah-Choon, and S. Nachiappan. “Examining the Interrelationships between Supply Chain Integration Scope and Supply Chain Management Efforts.” International Journal of Production Research, 48.22 (2010): 6837-6857. Print.
Waters, Donald. Global Logistics: New Directions in Supply Chain Management. 6th ed. 2010. London: Kogan Page. Print.